What is Bridge Financing?
Bridge financing is typically utilized in pre-stabilized properties or properties requiring capital improvements to unlock the potential value.
Timing Constraint: Purchase money loan that prioritizes quick close (whether it be a short escrow period or a more traditional bank loan is unable to perform),
Seasoning Requirements: New constructed or renovated property that requires more time to lease-up and stabilize to qualify for long-term, permanent financing.
Light Touch: Existing property that requires a “light touch” to cure deferred maintenance and lease the property up to market occupancy levels. This typically involved “good news” future funding for tenant improvements and leasing commissions once new leases are signed.
Heavy Value-Add: Aged property that has been undercapitalized and requires a heavy renovation or repositioning, typically with a future funding component for capital expenditures.
Banks, debt funds, and private lenders are all active in the bridge lending space.
Advantages of Bridge Financing for Borrowers:
• Utilize debt financing to cure deferred maintenance or renovate the property to attract higher rents and unlock property value
• Quick-close potential on property purchase
• Tailored solution to fulfill your business plan, with both recourse and non-recourse options available, nationwide
What to consider when using Bridge Financing:
• Evaluate your bridge lender’s experience with your specific business plan and property type
• Explore whether your bridge lender completes post-closing processes (draw funding etc.) in-house or via a 3rd party
• Ask your capital advisor about their recent experience in dealing with your bridge lender candidate